Economy Project: Financial Literacy
By Sam Baker, KERA Morning Edition Host
Dallas, TX –
The Texas Credit Union Foundation next month begins another campaign to promote financial literacy. It's distributing $10,000 in grants to credit unions and community organizations to teach people about managing money - how to spend, save and invest wisely, balancing a checkbook, responsible use of credit - real basic stuff. But foundation executive director Courtney Nickles says a lot of people don't know it. And she believes financial illiteracy played a role in the current recession - the mortgage crisis, for instance.
Courtney Nickles: I think it's, for lack of a better word, a little bit of ignorance on families who were so desperate to get into homes because we know with foreclosures and so forth, and not having those tools, those correct tools to make those wise financial decisions that I think it was a dual partnership. Financial institutions were making several loans and making all these decisions sometimes on behalf of the consumer and putting stars in consumers' eyes.
Maybe being swayed to think that I can afford this home' and again not having that comfortable financial literacy to say wait a minute, I need to really dig deep. I need to look at my budget. I need to do all the pertinent things to make these decisions.' And I don't think those were done.
Sam Baker: So give me an example then of the type of financial literacy program or effort that you would make to reverse that or try to turn that around.
Courtney Nickles: Well the Texas Credit Union Foundation likes to think that we like to teach from cradle to grave. In preschool, even at five years old, you can start teaching them how to save through a piggy bank. Absolutely start teaching them for every dollar, save a dime; and like I said the value of money. With middle school, we really want to start teaching them the difference between needs and wants. We also have what we call the "We Promote the Need for High School Financial Planning Program" - how to budget their money, how to make smart decisions, difference between investing, savings and again, how to make those wise choices.
Sam Baker: Well, it's always great if you can start early, but then for adults who are in the midst of all of this now, mortgage is credit cards, etc. What do you do?
Courtney Nickles: I think you start with again, just simply creating a budget. Let's get everything on paper. Let's get everything in sight and see where we need to make some changes. What is going to make your life more comfortable?
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Sam Baker: It's one thing for adults to say, okay I have a problem. I'm at risk of losing my home. What do I do about that?' It's another thing entirely though maybe to say, I don't know what I'm doing.'
Courtney Nickles: Exactly, and that's the problem with adults because they don't want to admit to someone. They are ashamed that for instance, something as what some of us may think as very small as not knowing how to balance their checkbook. Financial institutions will tell you every single day that they have adults that come in and ask, please help me balance my checkbook.' A lot of us think that its addition and subtraction and we learn that when we're very young so it seems fairly simple, but if they were never taught and they were one of those that slipped through the cracks, then they never learned and therefore, they are not able to teach their children.
Sam Baker: Does credit cards fall under one of the areas where adults are in need of help in regards to financial literacy?
Courtney Nickles: That may be behind budget and just literacy in general, probably one of the main factors. It's a huge problem. We live in a world of we want things right now, we want that instant gratification, keeping up with the Joneses. Not only adults but young adults trying to get the best deals at Nordstroms or Starbucks or whatever it may be, we're living in a bit of a gluttonous society today and I think credit cards, I believe those for a while have gone hand in hand. With this downturn, people look to their credit cards and are living off of their credit cards, which is a shame and that just increases their financial trouble and will take them that much longer to get out of their mess.
Sam Baker: And you said budgeting is a huge problem?
Courtney Nickles: Lots of families do not live by a budget and just kind of fly by the seat of their pants, I guess you'll say on daily, weekly, monthly basis.
Sam Baker: Were they never taught any of these things or as time went along, they just left it behind?
Courtney Nickles: I think it's a little of both. In the trainings that we do, I ask attendees, which are all adults, how many of you learned it at home. How many of you learned it at school?' And they don't raise their hands with either one so there lies the gap. It also used to be, I believe, that parents thought that I send my child to school every single day, I pay my taxpayer money, and they learn about geography, history, whatever it may be. They should be learning about financial education at school as well. Then you'll hear teachers that used to say, well that is more of a personal thing that should be taught at home.' Their parents should be teaching those financial values at home and again as I said earlier, there lies a gap as well and so the students are not taught.
Courtney Nickles: And I'm not sure, Sam, if you're aware of House Bill 492. It was actually proposed and signed into law in June of 2005 by Gov. Rick Perry and it actually requires that every graduating high school student take a financial education course. So they must have this now before they graduate in the state of Texas.
Sam Baker: Why is it important to credit union foundation or to any financial institution to push financial literacy?
Courtney Nickles: To make our members as financially fit and savvy as we possibly can. That can really only benefit the credit union if you think about that or any financial institution. You're talking about delinquencies, bankruptcies - you just want your members to be smart and savvy and I think that benefits everyone involved.
Courtney Nickles heads the Texas Credit Union Foundation. You can find more information on efforts to promote financial literacy at KERA.org/economy.